The consultants behind the bumper executive pay packages that
triggered the "shareholder spring" have opened themselves up to
accusations of conflicts of interest by receiving additional fees
from the companies they advise.

An analysis by the Guardian shows that almost 70% of pay
consultants sold supplementary services to companies whose
remuneration committees they had guided. The figures emerged
following critical comments about the sector from former City
minister Lord Myners and from the High Pay Commission, which in
November highlighted concerns that consultants "rachet up"
executive pay.

Of the 50 most valuable UK public companies, 33 hired pay
consultants who also sold services to other parts of the same
company during 2011. The list includes businesses that attracted
some of the greatest attention during the "shareholder spring", in
which investors began rebelling against pay awards.

They include the pharmaceuticals group AstraZeneca, which
employs Deloitte to advise its remuneration committee, even though
the accountants also provide "taxation advice and other specific
non-audit services to the group"; Barclays, which hired Towers
Watson, a specialist consulting firm which also provided the bank
with "pension advice as the appointed adviser to the trustee of the
UK retirement fund"; and Xstrata, which employs the Hay Group,
another consulting firm which sold additional pay data to the
mining group.

The annual report of AstraZeneca stated it "judged that there
were no conflicts" in its hiring of Deloitte. Barclays’
annual report said it disclosed "any potential conï¬?icts
of interest the advisers may have" to the remuneration committee.
Xstrata said there was "no conflict of interest" with the hiring of
its pay consultant.

However, the High Pay Commission was "concerned that
remuneration consultants have a direct conflict of interest where
they provide executive pay advice and cross-selling for other
business". It added: "While the voluntary code for remuneration
consultants specifies that they should not cross-sell services,
anecdotal evidence and interviewees the High Pay Commission met
suggest this practice is widespread."

The Guardian’s figures also show that the pay advice
received by the top 50 companies is coming from an extremely
concentrated market, with Deloitte advising 17 of those firms -
including 10 of the top 20 - and Towers Watson being employed by a
further 11. Kepler and Aon Hewitt New Bridge Street advised six and
five of the top 50 companies respectively last year.

While much of the investor ire this spring was directed at
executives enjoying pay rises that outpaced share price gains,
providing the advice behind those packages has also proved
lucrative. According to Towers Watson’s accounts, its highest
paid director last year got pounds 693,000 a 13% pay rise, while
its board earned an average of pounds 332,000 each. Five years ago
the company paid its top earning director pounds 364,000 and its
average board member pounds 270,000.

A Towers Watson spokesman said: "Our advice is always going to
be the same - objective, fact-based, impartial and frank. It is for
this reason remuneration committees seek our advice regardless of
whether we play a broader role or not."

Deloitte did not return phone calls.

However, just as revolts over executive pay seemed to affect
sectors indiscriminately, there seems no obvious pattern as to
which pay consultant ended up in the middle of the controversy.

Of the notable investor revolts this year, Deloitte acted for
Aviva and AstraZeneca, Towers Watson acted for Barclays (although
it has now been replaced) and William Hill, Kepler was employed by
Trinity Mirror and Hewitt New Bridge Street advised Premier
Foods.

In numbers:

70%

Proportion of pay consultants who also sold other services to
client firms, as revealed by the Guardian analysis

28

Number of top 50 FTSE firms that are advised by just two pay
consultants, Towers Watson and Deloitte

13%

Pay rise awarded to the highest paid director at consultant
Towers Watson, which took their pay to pounds 693,000